Imagine a manufacturing company like Rajesh & Co. Pvt. Ltd. that wants two separate teams doing two separate jobs — the finance team tracking profits, creditors, and bank balances, and the costing team tracking how much it costs to make each unit. In a Non-Integrated Accounting System (also called a Non-Integral System or Interlocking Accounts System), these two teams maintain completely separate sets of books. There is no automatic flow of data between them.
Here's how it works in practice. The Cost Ledger (maintained by the costing department) contains accounts like Stores Ledger Control Account, Work-in-Progress Control Account, Finished Goods Control Account, Cost of Sales Account, and the all-important Financial Ledger Control Account (also called the General Ledger Adjustment Account). This last account is the bridge — it's a dummy account in the cost books that represents everything the cost department borrows from the financial books (like material purchased, wages paid). On the other side, the financial books contain a mirror account called the Cost Ledger Control Account. These two accounts keep the respective sets of books self-balancing.
Because both sets of books run independently, they will not automatically agree on profit figures. The profit as per Cost Accounts and the profit as per Financial Accounts will differ due to items like opening/closing stock valuation differences, purely financial items (interest received, dividends, donations) that appear only in financial books, and notional charges (like notional rent or notional interest on capital) that appear only in cost books. At the end of the period, a Reconciliation Statement is prepared to explain this difference. This reconciliation is a high-frequency exam topic — expect a 10–12 mark question almost every attempt. The formula is: Profit as per Cost Accounts ± various adjustments = Profit as per Financial Accounts. Understanding which items add and which deduct is the real skill here.